General Insurance Article - Rise of driverless cars debated by LMA

 Mr Powell told an audience of Lloyd’s underwriters and claims experts: “Autonomous and semi-autonomous cars will fundamentally alter the nature of driving and the insurance industry’s business model. These vehicles mean fewer collisions, which will take place at lower speeds. Removing the driver removes eight-out-of-ten of the most common causes of vehicle accidents.

  

 “Self-driving cars will trigger a decline in private car ownership while also creating new models of car ownership. Why own a car at all when you can simply command one to pick you up and drop you at your destination, with the efficiency and logistical benefits of self-driving cars meaning car travel will become much cheaper?

  

 “Two-car households could become one-car households. It’s easy to imagine a scenario in which, after having dropped one partner at the train station, the car returns home on its own to be used by the other partner before returning to the station that evening to pick up the commuter.”

  

 Commenting on the liability implications, Mr Powell said: “The insurance issues are fairly straightforward. The law says if you are in control, you are liable for any injuries or property damage you cause. So, if a vehicle cannot be driven by its occupant – for example, it has no steering wheel or controls – then it becomes a product liability issue. The occupant has no need for motor insurance, rather like a passenger in a taxi.

  

 “If the car can be driven, the driver will require insurance protection. Even if, at the moment of the crash, the occupant did not have his or her hands on the steering wheel, it would be very hard to argue that that person was not in control of the vehicle in the eyes of the law.”

  

 David Powell was speaking at an LMA seminar on the technology and insurance implications of driverless cars on Tuesday. He explained how advances in vehicle technology are already changing insurers’ claims experience with Thatcham Research predicting an 18 per cent fall in vehicle write-offs in the next ten years. Drivers of classic cars, by contrast, will continue to need traditional motor insurance.

  

 “The difficulty for the insurance market is going to be the transition between the current model and that which will be required in the future. Right now, we’re not able to say how that’s going to work.”

  

 Commenting on the potential for autonomous and semi-autonomous cars becoming vulnerable to hacking and cyber attacks, Mr Powell said that the threat of malicious attacks was a recognised major risk for insurers. The solution will be a combination of improved encryption and underwriters applying contractual terms to minimise their exposures. Older vehicles will pose little risk as they are unlikely to be networked.

  

 Also speaking at the event was Peter Shaw, CEO of Thatcham Research, the UK insurance industry’s automotive testing centre. He told underwriters that the technology being developed was very robust and effective. He said: “The hardware already exists to make cars fully autonomous. The next steps are to conduct extensive vehicle testing while also addressing the legal, political and cultural aspects of this change to our driving habits.”

  

 Mr Shaw noted that vehicle manufacturers’ use of combined radar, camera and lidar – laser sensing technology has resulted in major improvements in the vehicles’ abilities to accurately identify pedestrians, cyclists and other potential risks. Many of the systems have their origins in military technology but are now available in affordable everyday cars.

  

 Commenting on the speed of technological change, Mr Shaw said that by 2023 autonomous emergency breaking (AEB) would be required of all new vehicles and by 2030, the majority of the ‘UK car parc’ – all vehicles on UK roads – would have this fitted. Thatcham’s analysis further indicates that while high penetration of fully autonomous cars would not be seen for up to 30 years, three manufacturers have pledged to launch highly autonomous cars in 2017–18

  

 Reflecting on the evolutionary process of vehicle autonomy, Mr Shaw described the four stages of progress towards fully driverless cars as ‘feet off, hands off, eyes off, and then brain off.